What You Should Not Expect from Your Mutual Funds?

 

What You Should not Expect from Your Mutual Funds?

Recently Coal India is listed on the stock exchange with 40% of gain on the listing and that’s why people all around India are now start feeling good.

Well, this is a human psychology. When you make extra-ordinary profits from your investments in the short term, you start thinking that you are financially smart. You start thinking that your IQ also goes up and you start feeling good and intelligent.

But well, let me tell you that, this is just the psychological feeling. The reality is that, your Financial IQ remains the same irrespective of the profits you make from the stock market.

Now, let us talk about mutual funds. Many people have falsely higher expectations from the mutual funds. They think that the mutual funds will do some kind of miracle for them and make you rich and financially free in a short period of time.

But well, this is a Myth. The truth is that the mutual funds are mainly for long term goals. And one mutual fund is not just a one stock but its a portfolio of stocks. So in the long run, you can expect 15-20% compounded annual profit from the mutual funds and not more than that.

You should never expect unrealistic returns from your mutual funds. Another thing is that, many people have a false believe that the mutual funds can never go down. They always make profits. Well, this is also not the truth. Mutual funds returns are purely depend on the market condition.

Thus, be realistic and expect realistic (15-20% per annum) returns from your mutual funds. Never expect unrealistic returns from your mutual funds. And yes, your financial IQ only increase if you keep reading and learning more and more things about money and finance. There is no other way to increase it. Remember that, your stock market gains doesn’t reflect your Financial IQ.